Barclays remains bearish on HTC

Staff writer, with CNA

Mon, Oct 07, 2013 - Page 13

Barclays Capital said on Friday that it remains bearish about smartphone vendor HTC Corp’s (宏達電) earnings outlook amid fierce competition in the market, expecting the manufacturer to incur an operating loss in the fourth quarter and a net loss next year.

In a research note, the brokerage said it has maintained an “underweight” recommendation on HTC shares and had lowered its target price on the stock to NT$112 from NT$122.

HTC shares rose 1.5 percent to close at NT$135 on the Taiwan Stock Exchange on Friday, although it reported a quarterly net loss of NT$2.97 billion (US$101.2 million), or NT$3.58 per share, for the third quarter for the first time since the Taiwanese company launched its listing on the main board in March 2002.

The stock staged a technical rebound from its earlier losses caused by the third-quarter results, market analysts said, adding that as HTC shares had been depressed for some time by fears about losses, the results simply eliminated market uncertainty.

HTC missed its third-quarter sales target of between NT$50 billion and NT$60 billion and reported only NT$47 billion in consolidated sales for the three-month period, while incurring NT$3.5 billion in operating loss.

Barclays said that although HTC is planning to launch its new flagship model — the HTC One Max — later this month, the firm will still lag behind its global and Chinese rivals by one to two months in terms of new model launches.

“The sales volume of the HTC One Max for the fourth quarter could reach just 1 million units, as the momentum of the global high-end smartphone market is declining,” the brokerage said.

It said that due to a lack of production scale, HTC is likely to continue to post an operating loss in the fourth quarter, with its operating margin expected to stand at a minus-3 percent.

Barclays said HTC’s shipments for next year are expected to rise to 25 million units from 22 million units estimated for this year, but as the company owns just a 2 percent share in both the global and China markets, it could face some risks in component sourcing and encounter a component supply shortage.

The brokerage said HTC is expected to incur a net loss of NT$0.72 per share next year, a downward revision from an earlier estimate of NT$0.63 in earnings per share.